How Housing Costs Drive Levels of Homelessness

A new analysis of rent prices and homelessness in American cities demonstrates the strong connection between the two: homelessness is high in urban areas where rents are high, and homelessness rises when rents rise.

To identify and illustrate the housing market dynamics driving these trends, The Pew Charitable Trusts compared homelessness and rent data in 2017 and 2022. In recent years, many metro areas in the U.S. have seen stark increases in levels of homelessness along with fast-rising rents. At the same time, some other locales that saw slow rent growth experienced declines in homelessness.

Media reports have highlighted increases in homelessness and the emergence of encampments in numerous cities, including Austin, Texas; Fresno, California; Phoenix, Arizona; Raleigh, North Carolina; Sacramento, California; and Tucson, Arizona. But other urban areas where homelessness declined over the same period—such as in Chicago, Houston, Minneapolis, and Philadelphia—recorded slower growth in rents than in the U.S. overall.

A large body of academic research has consistently found that homelessness in an area is driven by housing costs, whether expressed in terms of rents, rent-to-income ratios, price-to-income ratios, or home prices. Further, changes in rents precipitate changes in rates of homelessness: homelessness increases when rents rise by amounts that low-income households cannot afford. Similarly, interventions to address housing costs by providing housing directly or through subsidies have been effective in reducing homelessness. That makes sense if housing costs are the main driver of homelessness, but not if other reasons are to blame. Studies show that other factors have a much smaller impact on homelessness.

Much of the research looks at the variation in homelessness among geographies and finds that housing costs explain far more of the difference in rates of homelessness than variables such as substance use disorder, mental health, weather, the strength of the social safety net, poverty, or economic conditions. Some vulnerabilities strongly influence which people are susceptible to homelessness, but research has repeatedly concluded that these factors play only a minor role in driving rates of homelessness compared with the role of housing costs.

For its analysis, Pew reviewed the U.S. Department of Housing and Urban Development’s homelessness data from 2017 and 2022 and Apartment List rent data covering the same period. In the six metro areas highlighted where homelessness rose sharply, rents increased faster than the national average. (See Figure 1). Over the same period, the four urban areas featured that experienced declines in homelessness saw low rent growth.

In some areas, the relationship between housing costs and rates of homelessness is less clear, perhaps because of data volatility or the role played by other factors that influence homelessness. But the strength and consistency of researchers’ findings over time indicate that these places are the exception and that the weak relationship may be temporary.

Recent Pew research indicates that cities that added to their housing supply in recent years, typically by reforming their local zoning codes to allow more apartments to be built, succeeded in keeping rent growth low. On the other hand, several areas in which homelessness spiked had added little to their local housing supply. For example, the Fresno and Tucson areas added just 2.7% and 3.2%, respectively, to their housing stock between 2017 and 2021, despite high demand for homes. The Austin area, meanwhile, added 15.8% to its housing stock despite its restrictive zoning code, but that still fell short of its 22.7% growth in households over that time. With so many households seeking too few homes, rents climbed.

Throughout the United States, rents have reached all-time highs. Half of renters nationwide now spend at least 30% of their income on rent, and a quarter spend at least 50%. As recently as the 1970s, when rents as a share of income were far lower, homelessness was rare in the United States and housing was often available in buildings where individuals would rent private rooms but share kitchens, bathrooms, or common spaces. These low-cost units helped stave off homelessness because someone earning low wages or receiving disability benefits could usually afford to rent a private room. In the decades since, zoning or building code restrictions in most cities prevented more of these units from being developed, and city governments encouraged their conversion into other uses.

There are still places in the U.S. where levels of homelessness are low, either because those places have low-cost housing readily available—such as Mississippi, where homelessness is 10 times lower than California—or because they have rapidly added housing and made a concerted effort to reduce the ranks of residents without homes. In Houston, the rate of homelessness is 19 times lower than it is in San Francisco, even though Houston’s population has grown more than San Francisco’s in the past decade. (See Figure 2.)

Looking at these markets helps to show how population growth generally does not explain growth in homelessness, except in instances where there is not a sufficient increase in the housing supply. Examples of that include Vermont and Maine, both of which until recently have had very restrictive zoning that limited building more homes. Each saw an influx of residents during the COVID-19 pandemic, and homelessness increased 151% and 110% in those states, respectively, from 2020 to 2022.

The metro areas shown in Figure 1 illustrate how research has found that increases in rents cause increases in homelessness. Those shown in Figure 2 exemplify the related, but distinct, finding from academic research that areas with high rents have high rates of homelessness.

The academic research has consistently found that allowing more homes to be built keeps housing costs down. In tandem with the work showing that housing costs are the primary driver of homelessness, the findings suggest that allowing more housing to be built, whether subsidized or not, can reduce homelessness. What distinguishes places in the U.S. with low levels of homelessness is that housing is more abundant relative to the demand and, therefore, costs less. Recognition of the critical need to make sufficient housing available to those going through or at risk of homelessness—rather than requiring participation in programs focused on vulnerabilities such as substance use or mental health issues—has been bipartisan. Philip Mangano and Barbara Poppe, the leaders of the U.S. Interagency Council on Homelessness under Presidents George W. Bush and Barack Obama, respectively, both reviewed the analysis in this article and have championed this approach.

Homelessness and housing affordability have become high priorities for Americans, according to surveys. The evidence shows that allowing more lower-cost housing, such as apartments or individual rooms with shared facilities, can help solve both problems. As stakeholders work to address these difficult issues, welcoming more housing—especially low-cost housing—will be crucial.

Alex Horowitz is a director and Chase Hatchett and Adam Staveski are senior associates with The Pew Charitable Trusts’ housing policy initiative.